In 1998 the defendant employee was injured in an accident at work and claimed damages of over £419,000 against his employers. The employers’ insurers, who were dealing with the claim, suspected that the defendant had exaggerated the extent of his injuries and carried out investigations but were unable to find evidence sufficient to prove that in court. In 2003 the insurers reached a settlement with the defendant to pay him £134,973 in full and final settlement of the claim and a Tomlin order was made to that effect. In 2005 the insurers received proof that the employee had recovered from his injuries a year before the settlement had been reached. The insurers brought proceedings for, inter alia, rescission of the settlement agreement. The defendant applied for the proceedings to be struck out or for summary judgment in his favour. The district judge refused the application but the circuit judge reversed that decision. The Court of Appeal allowed the insurers’ appeal and the claim proceeded to trial. The trial judge, having found that the defendant had exaggerated the effects of his injury, assessed the quantum of damages at £14,720 and ordered the defendant to repay the amount received under the settlement less £14,720. The Court of Appeal allowed the defendant’s appeal on the grounds, inter alia, that although the defendant had misrepresented the extent of his injuries, the insurers had not relied on that misrepresentation when they had reached the settlement agreement.

On the insurers’ appeal—

Held

Held, appeal allowed. In a claim for deceit based upon alleged misrepresentation it had to be shown that the defendant had made a materially false misrepresentation which had been intended to induce, and had induced, the representee to act to his detriment. It was not necessary as a matter of law to prove that the representee believed the misrepresentation to be true although the representee’s state of mind might be relevant to the issue of inducement. A claimant alleging deceit did not have to show that he had believed the misrepresentation and his reasonable belief as to whether the misrepresentation was true was not the test. The representee might settle the claim on the basis that he thought the misrepresentation would be believed by the judge. The fact that the insurers did not wholly believe the defendant did not preclude them from having been induced to reach a settlement by the defendant’s misrepresentations. Qualified belief or disbelief did not rule out inducement, and it was sufficient to establish that the fact of the misrepresentation had been a material cause of the defrauded representee entering into the settlement. The questions whether the insurers had been induced to enter into the settlement agreement and whether doing so had caused them loss were questions of fact which had been correctly decided in the insurers’ favour by the judge. Accordingly, the judge’s order would be restored.